I'm planning to use gifting out of surplus income to mitigate inheritance tax, but I have some concerns. Is it possible to get an interim review of the records being kept to demonstrate gifts are from income and not capital? Once one is dead there is little that can be done to correct mistakes...
To this end is there a definitive list of what HMRC consider as genuinely capital spend as opposed to living expenses. For example, it is understandable that IT purchases would be considered a 'living expense' as they quickly become redundant, while purchases of expensive jewellery remain in the estate and can thus be regarded as capital expenditure.
Would this logic place such items as home extensions, replacement windows/doors/shutters and replacement central heating systems etc as reasonable capital spend, the value remaining in the estate, or as maintenance in the same group as decorating required to maintain one's standard of living?.
An excellent tax consultant put us on the right track two year ago, but he has since moved on and they are not that easy to find. G.A, via email. SCROLL DOWN TO ASK YOUR FINANCIAL PLANNING QUESTION. Gifting: If gifts are deemed to have been made from capital, then they will be included in inheritance tax calculations.
Harvey Dorset, of This is Money, replies: The exemption you are looking to use, officially known as 'normal expenditure out of income', is a useful way of passing on wealth to your children without incurring inheritance tax on the money you give to them.
